WESTPAC

Overall, Westpac’s result was slightly higher than our forecasts but for low-quality reasons.

High-value recurring revenue lines (net interest, wealth management, insurance, fees and commissions) showed negligible growth. The offset was a better performance from lower-value trading revenue and lower bad debt provision. If we adjust these to more normal levels, revenue would be around $100 million lower – only 0.2% higher than in the previous corresponding period.

Operating costs were marginally lower than expected and, despite comments about the strength of Westpac’s capital position, it is re-introducing a 1.5% discount on dividend reinvestment plan pricing to boost participation, highlighting management’s expectations for the outlook for regulatory capital requirements. The bigger issue, however, remains exposure to a property correction.